I looked at the VX futures term structure this morning, i.e. the series of VX futures contracts from now into late this year, and something occurred to me. For over six months now I have been plotting various changes in this curve in exhausting detail and the story it’s been telling us has remained largely identical. Big trouble ahead! So how come the market continues to push higher and higher with the SPX officially marking new all time highs as well as reaching the coveted $4,000 mark?

If this market has proven anything to us then by now then it is that it wants to go up up up, and then up some more. Which of course makes absolutely no sense given that we are still battling a worldwide viral epidemic which, among many other aspects of our lives, has wiped out a huge swath of our global economies. However having the benefit of following the market’s gyration for over 20 years now I’ve long learned that what makes common sense – at least according to the basic rules of economics –  unfortunately very has little to do with actually happens in the financial markets. For this is war and if this game was easy then everyone would be winner. But the [...]

Last week turned into a complete and utter roller coaster which traversed not only the entire weekly expected move but did so in both directions. Moves like these usually serve to confuse the average retail participant but they often present unique profit opportunities to savvy option traders. In fact what transpired once again confirms what I have been preaching here over the past year as well as the trading approach I outlined in my RPQ options courses.

A subscriber who bought my Options 201 course wrote me today asking for some clarification on how to best stack your weekly butterflies. There were four aspects to his inquiry, namely: 1) which expiration to choose on which days of the week 2) how to distribute your exposure 3) deciding directional bias and 4) structuring ones trade based on the current IV environment. Let’s tackle these questions one by one: